Risk, pains of N.L. oil dependence highlighted by University of Calgary

The Southern Gazette

Published: Sep 30, 2017 at 1:36 a.m.

Updated: Sep 30, 2017 at 5:39 a.m.

Ron Kneebone, with the University of Calgary’s School of Public Policy, calls for tax hikes and spending cuts by the Government of Newfoundland and Labrador, while presenting new research on provinces dependent on volatile resource revenues. — Screen capture from webcast in Calgary

Researchers at the University of Calgary are warning Newfoundland and Labrador needs to cut its spending and raise taxes.

“There’s simply no way around that if they want to avoid going back to their history of accumulating debt,” said Ron Kneebone, the area director for economic and social policy, in presenting a new research paper from the university’s School of Public Policy on Tuesday afternoon.

He predicted this province will be announcing a $1.8-billion deficit when it releases its budget Thursday — or roughly $3,300 per person.

“It’s going to be the largest deficit the province has ever had — at least back to 1970 and I believe the largest in its history,” he said.

The researchers’ message extends beyond this coming budget and comes as a result of an analysis of the public spending and taxation in three provinces with the “rags to riches” story based on volatile resource revenues.

“Mind the gap: dealing with resource revenue in three provinces,” is the new report, focusing on decades of past budgeting and the results in Alberta, Saskatchewan and Newfoundland and Labrador.

There are lessons to be learned by this province from Alberta’s experience in particular, Kneebone said, showing the trend there has been to allow spending to grow, without raising taxes, as large resource royalties flow into the public coffers. It leaves the province in a position of having to make sudden and “draconian cuts” when that revenue stream falters, he said.

Keeping spending in check, while taxes grow with spending, will defend against forced harsh and sudden cuts.

“There’s simply no way around that if they want to avoid going back to their history of accumulating debt,” said Ron Kneebone, the area director for economic and social policy, in presenting a new research paper from the university’s School of Public Policy on Tuesday afternoon.

He predicted this province will be announcing a $1.8-billion deficit when it releases its budget Thursday — or roughly $3,300 per person.

“It’s going to be the largest deficit the province has ever had — at least back to 1970 and I believe the largest in its history,” he said.

The researchers’ message extends beyond this coming budget and comes as a result of an analysis of the public spending and taxation in three provinces with the “rags to riches” story based on volatile resource revenues.

“Mind the gap: dealing with resource revenue in three provinces,” is the new report, focusing on decades of past budgeting and the results in Alberta, Saskatchewan and Newfoundland and Labrador.

There are lessons to be learned by this province from Alberta’s experience in particular, Kneebone said, showing the trend there has been to allow spending to grow, without raising taxes, as large resource royalties flow into the public coffers. It leaves the province in a position of having to make sudden and “draconian cuts” when that revenue stream falters, he said.

Keeping spending in check, while taxes grow with spending, will defend against forced harsh and sudden cuts.